MERELY BECAUSE PAYMENT HAS NOT BEEN MADE IT DOES NOT CONSTITUTE OFFENCES PUNISHABLE UNDER SECTIONS 406/420 OF THE INDIAN PENAL CODE

In Pradyut Samanta Versus The State of West Bengal & Another - 2026 (2) TMI 999 - CALCUTTA HIGH COURT, the petitioner was doing business of selling chicken and poultry. The petitioner obtained a certificate from Harinkola – 2 Gram Panchayat to run the said business under the name ‘Loknath Feed Centre’.

The petitioner used to purchase chicken and poultry feed from the opposite party 2 since 2012. Both the parties were in good relation in their businesses. The opposite party, the supplier used to supply goods on credit. The petitioner regularly paid the dues either in cheque or cash or bank transfer for the dues payable by him to the opposite party No. 2. The opposite party No.2 issued receipts for the amount received from the petitioner.

The opposite party raised bills for the purchases made by the petitioner during the period from 01.04.2013 to 31.03.2014 to the tune of Rs.1.02 crores. The petitioner paid Rs.75.61 lakhs and the remaining amount was indicated in the supplier’s ledger as outstanding. Even after this period, the business between the petitioner and the opposite party No. 2 ran smoothly.

The opposite party no.2 used the security cheques given by the petitioner without the knowledge of the petitioner. On 12.11.2016, the police picked up the petitioner, without any notice and without any reason or explanation. The petitioner came to know that the Opposite Part No.2 filed a police complaint against the petitioner alleging that the petitioner did not pay Rs.40 lakhs as outstanding dues.

Based on the complaint given by the opposite party, the police registered an FIR on 11.11.2016 under Section 406 and Section 402 of the Indian Penal Code, dealing with criminal breach of trust and cheating respectively. On completion of investigation a charge sheet was also filed against the petitioner. The petitioner was released on bail by the Court.

The petitioner filed the present revision petition before the High Court challenging the illegal action of the police. The petitioner submitted the following before the High Court-

• The claim of Rs. 40 lakh is completely false and frivolous. It is not linked to any specific bill and is clearly contradicted by bank statements and receipts, which indicate payments were made till July 2016.
• The transactions made between the opposite party No. 2 and the petitioner are commercial transactions.
• The petitioner made the payments due to the opposite party No. 2 regularly.
• Even there may be default then the right course of action is to file civil suit for the recovery of the said amount and no action can be taken against the petitioner under the criminal laws.
• The opposite party, with an ill motive, attempted to convert alleged breach of contractual obligations and/or civil disputes into a criminal complaint.
• The Petitioner is innocent and never committed any offence as alleged by the complainant/opposite party no. 2.

The petitioner relied on various case laws of Supreme Court and High Courts. The petitioner prayed the High Court to quash the proceedings pending before the Trial Court to prevent abuse of process of law.

The Opposite Party No. 2 did not appear before the High Court and not prayed for an adjournment. The State submitted the following before the High Court-

• The business between the Opposite Part No. 2 and the petitioner continued for a long period.
• It is an admitted fact that the petitioner has outstanding dues to the Opposite Party No.2.
• Since the petitioner did not pay the dues despite promise, the petitioner has committed an offence as alleged by the Opposite Party No. 2.
• The petitioner committed an offence as alleged by the opposite party no. 2, and after the culmination of the investigation, sufficient materials were collected against the Petitioner to establish a prima facie case, punishable under sections 406 and 420 of the Indian Penal Code.
• The proceeding should not be quashed and allowed to be continued to unearth the truth.

The High Court considered the submissions of the parties to the present revision petition. The High Court also perused the materials on record and found that in the present case, there was no mention that there was intention on the petitioner is to cheat which is an essential ingredient for an offence under Section 420 of the Indian Penal Code. The High Court further found that there is nothing in the complaint to show that the petitioners had dishonest and fraudulent intentions at the time, when the opposite party had supplied feed to the petitioner from time to time, between 2012 and 2016.

Section 420 of the Indian Penal Code provides that whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Section 406 of the Indian Penal Code provides that whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with 1[imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.

The High Court observed that even assuming the allegations to be correct for the sake of argument, any alleged dues recoverable from the purchaser would, at best, give rise to a dispute civil in nature, amenable to adjudication before a competent Civil Court. The complaint does not disclose the essential prima facie ingredients of the offences punishable under Sections 406 and 420 of the Indian Penal Code.

The High Court further observed that even if there are dues or business transactions or non-payment of dues amounts by no stretch of imagination, they can be called dishonest inducements. Simply because of the amounts have not been paid or are outstanding will not make it a case of wilful or dishonest inducement or deception. It is not the case of the opposite party in the present case that he was deceived by fraudulent or dishonest inducement from the beginning of the transaction; rather, it is an admitted fact that the petitioner

had made regular payments from time to time. The breach of contract or business transaction cannot be called cheating in the facts of this case. The ingredient of the offences alleged by the opposite party no.2 is missing. Merely because payment has not been made or accounts have not been settled, it does not constitute offences punishable under Sections 406/420 of the Indian Penal Code. The disputes between the parties are purely civil in nature, and criminal proceedings in a civil case should not be allowed to be continued any further against the present petitioner; it would be an abuse of process of law. To secure the end of justice, the proceeding deserves to be quashed. The High Court set aside the impugned action of the police in the present case.